The Effect of Board Characteristics on Quality of Board Processes in State-Owned Companies

The purpose of this study is to investigate the impact of the structural characteristics of the board on board processes in State-owned companies. In this research, the size of board, board independence, leadership structure and board diversity as mechanisms of corporate governance were studied. As well, the influence of politicians as a new factor that threatens the independence of the board of state-owned companies was examined. Due to information confidentiality restrictions, many government companies did not agree to participate in the study; therefore, the research sample was selected based on available sampling. Finally, 127 out of 265 companies were surveyed. Three researcher-made questionnaires and one standard questionnaire, Ong Chin Huat, were used to measure board processes. Structural equation modeling (SEM) and smart PLS software were used for data analysis. The results indicate that board decision-making processes are affected by board size. More precisely, the size of the board has negatively affects the three processes of coherence, norms of effort and application of skills and knowledge of the board. On the other hand, the role duality of CEO has a positive impact on applying skills and knowledge process. Moreover, the board diversity with three diversity index; age, field of study, and professional background of board members has a significant positive impact on all board processes. According to results, the effect of age diversity index with negative factor loading, and the effect of diversity of field of study and professional field with positive factor loading were confirmed.